Concerns over the wider disruption of supplies from OPEC countries could fuel further oil price increases, but at the same time improve realisations of oil companies in India which are reeling under under-recoveries
Soaring prices of crude oil in the international markets due to the political unrest in the Middle East and North Africa (MENA), will improve the realisations of private oil exploration and production companies in India, according to a research report by CRISIL.
"The margins of refining companies will also improve and the political unrest in the MENA region which has already been rocketing prices of crude oil, would fuel further price increase," the rating agency says. The report states that average crude oil (Dated Brent) prices are expected to increase more than 15% to over $102 per barrel in the fourth quarter of 2010-11 as against the previous quarter.
"In a year when we expect world dependence on OPEC oil supply to increase, concerns over a wider disruption of supplies from OPEC countries will fuel further oil price increases," said Sridhar Chandrasekhar, head, CRISIL Research. (OPEC, or the Organization of Petroleum Exporting Countries, is an intergovernmental body of 12 oil-producing countries which together account for more than two-third of the world's reserves. Most of these countries are located in the MENA region.)
Following the Union Budget presented in Parliament earlier this week, state-run oil companies from India are proposing to raise petrol prices by up to Rs4 a litre to offset rising crude oil costs, arguing that the Budget had ignored their demand for a cut on duties on fuel. The government freed pricing of petrol in June last year.
India imports 80% of its energy requirement and the average price at which India imports crude oil is about $110 a barrel. Oil companies say they are losing Rs10.70 a litre on diesel, Rs21.60 a litre on kerosene and Rs356.07 on a cooking gas cylinder.
Kisan Ratilal Choksey Shares and Securities said, "We believe it is a loss for the oil companies as no duties were cut on the fuel. Simultaneously, the subsidy amount has been reduced to Rs23,640 crore from Rs38,386 crore, a decline of 13%. With no relief from the Budget, the oil companies have no choice but to raise the petrol price which was deregulated last year. We believe this would help the companies to compensate their revenue loss."
Private and government-owned refining companies too will benefit. CRISIL, an affiliate of the international ratings and financial services company Standard & Poor's, expects gross refining margins to rise from $6.8 per barrel in the third quarter of 2010-11 to $8-9 per barrel in the fourth quarter.
On 2nd March, crude oil prices touched $116 per barrel, the highest level since the middle of 2008, and prices are expected to move northward on fears that the violence could spread to neighbouring countries such as Saudi Arabia and Iran.
Before the dust had settled in Egypt, the Libyan crisis erupted, leading many oil companies to suspend their operations there. Libya accounts for close to 2% of the global oil output. Last week, Nomura International (HK) said, "If Libya and Algeria were to halt oil production together, prices could peak above $220 per barrel and OPEC's spare capacity will be reduced to 2.1 million barrels per day, similar to levels seen during the Kuwait-Iraq conflict and when prices hit $147 per barrel in 2008."
Crude oil prices, which were already inching up over the past two year on the back of improving fundamentals, started soaring, as political turmoil erupted in Tunisia in December. As the uncertainty over oil supplies disturbed market sentiment, the unrest in Egypt pushed oil prices to over $100 per barrel.
However, CRISIL feels that "government-owned oil exploration and marketing companies will not benefit as much, as they will have to shoulder an increase in subsidy burden on account of rising oil prices."
The subsidy burden for oil marketing companies would nearly double on the quarter to Rs300 billion in January-March from Rs155 billion in the December quarter. The government compensates losses of oil marketing companies from the sale of petroleum fuels at lower than the cost price. The total under-recoveries for this fiscal ending March are expected to cross Rs750 billion.
Punjab National Bank proposes to buy stake in an existing life insurance company and has shortlisted 10 companies, including Reliance Life and Bharti AXA, for the strategic partnership
State-owned Punjab National Bank (PNB) said it proposes to buy stake in an existing life insurance company and has shortlisted 10 companies, including Reliance Life and Bharti AXA, for the strategic partnership.
The Bank had invited expression of interest from intending insurance companies for strategic partnership in insurance business with the bank in December last year.
PNB said it has decided to participate in the life insurance venture through "a corporate agency tie-up along with equity participation in an existing Indian life insurance company."
In a statement, the public sector lender said, "RFPs (request for proposals) have been issued to ten insurance companies...."
The companies which had expressed interest in the proposal include Reliance Life and Bharti AXA, Birla Sun Life, HDFC Life, Max New York Life and Met Life, the bank said. These companies had filed various models of business with the lender.
"The bank will finalise the partner for life insurance business based on the evaluation of the proposals submitted by these insurance companies," PNB said.
Last year, the bank decided to part ways with two of its partners in a planned life insurance joint venture. PNB bought the entire 26% stake held by Principal Financial Group and the 32% participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.
PNB's stake in the proposed joint venture was 30%, while that of Vijaya Bank was 12%.
On Friday, PNB ended 0.71% down at Rs1,080.55 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.02% to 18,486.45.
With this deal, Amrutanjan has diversified into the beverage business
Amrutanjan Health Care has forayed into the beverage business by acquiring Chennai-based Siva's Soft Drink Private Ltd for Rs26.20 crore.
Siva's Soft Drink is the manufacturer of soft drink and fruit based under the brand name "Fruitnik". "Amrutanjan Health Care has entered into an agreement with Siva's Soft Drink Pvt Ltd, Chennai to acquire their soft drink and fruit based beverages business along with the brand 'Fruitnik' for a total consideration of Rs26.20 crore," Amrutanjan said in a filing to the Bombay Stock Exchange (BSE).
Established in 1893, Amrutanjan is a strong player in the health care industry. The company currently offers various products in pain management, cough and cold care, health and home care. It exports some products to East Asia, Middle East and South East Asia.
On Friday, Amrutanjan ended 7.62% up at Rs688.15 on the BSE, while the benchmark Sensex declined 0.02% to 18,486.45.